China’s HNA Agrees to Buy 24% of Azul to Expand in Latin America

Passengers board an Azul jet at Viracopos International Airport in Campinas, Brazil.

Photographer: Paulo Fridman/Bloomberg

Chinese conglomerate HNA Group Co. agreed to pay 1.7 billion reais ($455 million) for a stake in Azul Linhas Aereas Brasileiras SA.

With the deal, HNA will become the biggest individual shareholder of Azul, owning a 24 percent stake, and will have one seat in the board of Brazil’s third-largest airline by market share, the companies said in a statement Tuesday.

The agreement should help boost Azul’s cash position at a time the drop in Brazil’s currency is increasing dollar-linked costs for local airlines. The real has slumped 29 percent this year, the most among major currencies. At the same time, growing unemployment and the country’s longest recession since the Great Depression are also hurting demand for air travel.

The deal values Azul, which is not publicly traded, at 7.17 billion reais. Gol Linhas Aereas Inteligentes SA, Brazil’s largest publicly traded airline, has an enterprise value of 8.3 billion reais. Gol has seen its market cap shrink to 1.23 billion reais as shares sank 77 percent this year, the second-worst performance in the Ibovespa benchmark gauge.

Azul plans to use the capital to strengthen its balance sheet, renovating its fleet and reducing debt, the company said in a separate e-mailed statement.

HNA Group, a financial-to-tourism conglomerate based in the southern Chinese island of Hainan, owns stakes in a handful of airlines domestically and abroad, including Hainan Airlines and Ghana’s AWA Airlines. In July, it agreed to buy airport luggage handler Swissport International Lda. from PAI Partners SAS for $2.8 billion.

Azul has postponed its planned initial public offering at least twice because of the drop in the local equity market. Founder David Neeleman also mulled the possibility of an IPO for the company’s TudoAzul loyalty plan in August.

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